ARTICLE
17 January 2025

Most Relevant Changes Of Dutch Tax Legislation

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This alert discusses the most relevant changes in Dutch tax legislation applicable per 1 January 2025 and upcoming years...
Netherlands Tax

This alert discusses the most relevant changes in Dutch tax legislation applicable per 1 January 2025 and upcoming years, with a focus on rules relevant for cross border corporate structures and internationally oriented companies.

We already informed you about the proposed legislative changes for the occasion of Budget Day by way of our tax alert dated
18 September 2024. Besides the proposals in connection with Budget Day, also other changes which are relevant for corporate income taxpayers involved in cross border corporate structures entered into effect on 1 January 2025, such as the amendments in the tax classification (opaque or transparent) rules for domestic and foreign legal entities, the abolition of partial foreign taxpayer regime and real estate transfer tax exemption in share transactions and changes to special tax regimes (VBI and FBI regime). Also, certain other legislative proposals are summarized which entered into force on 1 January 2025 or are expected to enter into force from 1 January 2026 onwards.

Corporate income tax

Earning stripping rules
The generic interest deduction limitation rule on net interest expenses (earnings stripping rule) had a threshold of the highest of EUR 1 million or 20% of the EBITDA in the year 2024. This percentage has been increased to 24.5% as per 1 January 2025.

Interaction corporate income tax and minimum tax
The changes aim to specify that for certain anti-abuse rules, a so-called minimum tax (also known as Pillar 2) qualifies as a profit tax. The changes may be relevant for the application of the anti-base erosion rules, the Dutch participation exemption rules and the object exemption.

Amendment anti abuse rule article 10a CITA
Article 10a of the corporate income tax Act (CITA) contains an anti-abuse provision under which interest on debts to related entities or persons is not deductible to the extent that those debts, in brief, relate to certain 'tainted' situations. Due to a change in the Dutch tax classification rules (see further below), transparent entities have been included under the definition of related entities for the application of article 10a CITA.

Amendment debt waiver income exemption
The interaction between the debt waiver income exemption and the loss carry forward rules in the CITA has been amended. Under the limitation of loss carry forward rules, if a company has more than EUR 1 million in losses to offset and a taxable profit (including income as a result of the waiver) exceeding EUR 1 million in the same year, CIT may be due, since losses in excess of EUR 1 million can only be set off for 50%. This tax burden can obstruct agreements under the Dutch extrajudicial restructuring plans bill (WHOA) and may push viable businesses into bankruptcy. Under the new rules, debt waiver income is fully exempt for situations where more than EUR 1 million in losses can be carried forward, as long as the debt waiver income exceeds the losses incurred in the same year. For cases with losses under EUR 1 million, the current system remains unchanged.

Simplified sister merger
The existing tax rollover facilities for legal mergers has been extended to shareholders involved in a simplified sister merger. In a simplified sister merger, two subsidiaries which are both fully owned by the same shareholder are merged without issuance of new shares. Under the new rules, the shareholder can apply for rollover relief, subject to certain conditions.

Implementation ATAD1 GAAR
The General Anti-Abuse Rule (GAAR) from the first EU anti-tax avoidance Directive (ATAD1) has been incorporated into Dutch tax law. When the Netherlands implemented the ATAD1 into domestic legislation, the choice was made not to include the GAAR in the law as the GAAR's objectives are already addressed by the existing legal concept of fraus legis. The proposed measure addresses a request from the European Commission without intending to make any substantial changes to the current legal practice.

Tax classification rules
The Dutch entity classification rules have changed on 1 January 2025. The legislative change impacts the tax treatment of Dutch partnerships (CV and open CV), funds (FGRs) and foreign legal forms and is aimed to reduce international mismatches. Under the new rules all CVs will in general be qualified as tax transparent, unless they qualify as an FGR. For more information regarding this bill, reference is made to our tax alert of 1 June 2023 and of 1 November 2024.

Changes FBI and VBI regime
As of 1 January 2025, the regime for fiscal investment institutions (FBI) has changed. The FBI regime no longer applies to profits directly derived from real estate investments. Consequently, such profits will be subject to the regular CIT rates of up to 25.8% instead of the 0% rate. In addition, a new measure applies which restricts the access of the exempt investment institution regime (VBI) to CIT payers which qualify as a regulated investment institution within the meaning of the Act on Financial Supervision. A VBI which does not fall under this scope will lose its VBI status.

Personal income tax

30% extraterritorial allowance
The tax-free extraterritorial allowance will be reduced from 30% to 27% from 1 January 2027 onwards. The adopted rules replace an earlier law to scale back the advantages of the extraterritorial allowance, see our tax alert of 21 December 2023. In addition, the minimum required salary has been increased from EUR 46,107 to EUR 46,660 and the minimum required salary for employees under the age of 30 who have obtained a master's degree at a university from EUR 35,048 to EUR 35,468. These amounts are 2024 amounts and will be increased with inflation. A transitional regime applies for employees who already applied for the extraterritorial allowance in 2024.

Abolition of partial foreign taxpayer regime
The partial foreign taxpayer regime has been abolished per 1 January 2025. As a consequence, qualifying taxpayers can no longer opt for a partial exemption of Dutch personal income tax (PIT) (i.e. Box 2 and Box 3).

Business succession regime
Several changes to the business succession facilities for the roll-over facility of the substantial interest for PIT (DSR) and Dutch gift and inheritance tax purposes (BOR) have been made. The most important changes can be summarized as follows:

  • The scope of the exemption of the BOR has been increased to the going concern value of EUR 1.5 million (2023: EUR 1,325,253). The exemption of the surplus is lowered from 83% in 2024 to 75% in 2025.
  • The DSR and BOR will in principle only be available for ordinary shares and preference shares representing a minimum interest of at least 5% of the paid-up share capital (most likely per 1 January 2026).
  • Abolition of employment criterion (i.e. BOR only applies if beneficiary has been employee for at least 3 years), introduction of minimum age of the beneficiary of at least 21 years (per 1 January 2025).
  • Relaxation of the so-called ownership and continuation requirement (partly per 1 January 2025 and partly per 1 January 2026).
  • Limitation of unintended use of the BOR at a (very) high age (per 1 January 2026).
  • Limitation of double use of the BOR (per 1 January 2026).
  • The so-called 5% efficiency margin in will be abolished. This efficiency margin allows 5% of the non-qualifying assets to be reclassified as business assets eligible for the BOR (per 1 January 2026) and DSR (at a still unknown date).

Reduction of Box 2 tax rate
The PIT rules for the so-called substantial interest holders of box 2 changed. In short, this relates to individuals holding at least 5% of (a certain class of) shares, either on their own or together with certain others. The threshold of the lower rate of 24.5% increased from EUR 67,000 in the year 2024 to EUR 67,804 in the year 2025. The excess is taxed at a reduced rate of 31% (instead of 33% in the year 2024).

(Conditional) Withholding tax

New group criterion
The Netherlands levies a conditional withholding tax on interest and royalty payments (from 1 January 2021 onwards) and on dividends (from 1 January 2024 onwards) to affiliated parties. The required affiliation is determined by way of a so-called 'qualifying interest'. A qualifying interest is inter alia present in the case of a 'cooperating group'. A new group criterion has been introduced instead of the 'cooperating group' with a reduced scope i.e. a 'qualifying unity' from 1 January 2025 onwards. A qualifying unity is present if entities act together with the main aim or one of the main aims to avoid the levy of withholding tax of one of the entities.

Repurchase facility listed companies
Under the repurchase facility, listed companies may repurchase own share without Dutch dividend withholding tax being due, subject to certain conditions. In the 2024 tax plan it was announced that this facility will be abolished on 1 January 2025. However, it was decided that this facility will remain in force.

Change in dividend withholding tax exemption
Per 1 January 2025, the optional dividend withholding tax exemption in domestic situations and within fiscal unity situations has been abolished. The shareholder may object and appeal against the withholding of the dividend tax, without interference of the distributing entity.

Real estate transfer tax

Abolition of real estate transfer tax exemption in share transactions
The current RETT exemption applicable to share transactions whose supply is subject to VAT has been abolished. Such transactions are subject to RETT at a rate of 4% per 1 January 2025.

Reduction in tax rate
The general RETT rate applicable to dwellings of 10.4% will be reduced to 8% on 1 January 2026. This rate will apply to non-owner-occupied dwellings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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